 Can international LETFs deliver their promised exposure to foreign markets?Hongfei Tang, Xiaoqing Eleanor Xu and Zihui Yang Journal of International Financial Markets, Institutions and Money, 2014, vol. 31, issue C, 30-74 Abstract: This study examines the tracking performance of U.S.-traded International Leveraged Exchanged-traded Funds (ILETFs) that track the following markets: Brazil, China, Europe, Japan, and Mexico. We find that the beta and returns of these ILETFs can deviate dramatically from their naïve expected counterparts. We further develop a comprehensive framework that decomposes an ILETF's return deviation into misperception-related components and tracking error-related components. Our results suggest that daily investors in ILETFs should be mindful of their underexposure to the foreign markets and overexposure to the U.S. market, while longer-term investors should pay special attention to the negative compounding deviation during volatile markets. Keywords: Leveraged ETFs; International stock markets; Price discovery; Compounding effect; Tracking error (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:31:y:2014:i:c:p:30-74 DOI: 10.1016/j.intfin.2014.03.003 Access Statistics for this article Journal of International Financial Markets, Institutions and Money is currently edited by I. Mathur and C. J. Neely More articles in Journal of International Financial Markets, Institutions and Money from Elsevier |
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